Homework Assignment #1

Solve the problems below and show all the work. Please turn it in on Sunday, February 10 by 6p.m. Hand-writing is acceptable.

- In a perfectly competitive market, please draw the demand and supply curve in a graph, and solve the equilibrium price and quantity given the demand curve is D(p) = 76 – 5p, and the supply curve is S(p) = -32 + 13p. If the market price level is 10, what are the quantity supplied and quantity demanded, and what is the surplus or deficit?

- Assuming the utility function of Theodora is, where X is the quantity of good x consumed, Y is the quantity of good y consumed. The market price of good x is 25 dollars, the market price for y is 200. Theodora has a income of 4700 dollars. Please solve the utility maximization problem for Theodora, what bundle of good X and Y will she consume, and what is her maximum utility? (hint: given the utility function, , )